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spk06: Ladies and gentlemen, good morning, good afternoon, and evening. My name is Jake, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chorus Entertainment Q4 2022 Analyst and Investor Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. Thank you. As a reminder, this call is being recorded. I would now like to turn the call over to Mr. Doug Murphy, President and CEO of Chorus Entertainment. Mr. Murphy, you may begin your conference.
spk04: Thank you, Operator, and good morning, everyone. Welcome to Chorus Entertainment's fiscal 2022 fourth quarter and year-end earnings call. I'm Doug Murphy, and joining me this morning is John Gosling, Executive Vice President and Chief Financial Officer. Before I read the cautionary statement, I'd like to remind everyone that we have slides to accompany today's call. You can find them on our website at www.coruscant.com under the investor relations events and presentations section. Now let's move to the standard cautionary statement found on slide two. We note that forward-looking statements may be made during this call. Actual results could differ materially from forecast projections or conclusions in these statements. We'd like to remind those on our call today, in addition to disclosing results in accordance with IFRS, Corus also provides supplementary non-IFRS or non-GAAP measures as a method of evaluating the company's performance and to provide a better understanding of how management views the company's performance. Today, we will be referring to certain non-GAAP measures in our remarks. Additional information on these non-GAAP financial measures the company's reported results, and factors and assumptions related to forward-looking information can be found in Corus's fourth quarter 2022 report to shareholders and the 2021 annual report, which can be found on CDAR or in the investor relations financial reports section of our website. I will start on slide three. We end our fiscal year on a mixed note. On the one hand, we are pleased with the progress we've made in advancing our long-term strategic plan and its priorities, which until this morning's result had delivered five consecutive quarters of consolidated revenue growth. On the other hand, we now encounter a choppy advertising market with cross-currents ebbing and flowing through all advertising categories, both goods and services. This is resulting in TV advertising revenue declines evident in Q4 and expected to persist into F23. Before we further address the outlook and the details of this quarter's result, I would like to spend a moment reviewing our plan and the progress made in the past year. Our long-term growth narrative remains unchanged. We are transforming how we sell media. We are putting more content in more places, and we are growing our own content studio business. Highlights of our plan and action this past year include... The ongoing expansion of premium digital video offerings is part of our emerging streaming portfolio, now including Stack TV, the Global TV app, the Global Nose over-the-top product, Teletoon Plus, and the pending launch of Cluedo TV. The successful renewal of all our largest content supply deals with term extensions and broadened rights grants to support our growth initiatives in premium digital video. The delivery of our highest-ever recurring subscriber revenue result, given the still meaningful linear channels business, further accentuated by the strength of Stack TV. The growth of our international content licensing business, led by Nelvana and Cora Studios, and now bolstered by the addition of Waterside Studios and Aircraft Pictures. The improved financial flexibility of our balance sheet, as we termed out our bank debt with a second high-yield offering and the extension of our bank facility. and the ongoing focus on providing an attractive shareholder yield, funding our dividend, a record number of share repurchases, and progress on repayment of bank debt. As we highlighted in our Outlook update, excuse me, press release issued last month, we are in an advertising recession. All advertising across North America is being impacted, not just here at Corus. The Standard Media Index, SMI, a measurement the industry uses reported a 12% decline in the entire ad economy in the U.S. in July and a 7% decline for July and August combined when compared to those same months a year earlier. These declines, as reported by SMI, are for what they refer to as cross-media or all media, that's television, radio, digital, out-of-home, and print combined. This decrease in advertising demand is a logical result of companies trying to manage their profitability given inflation-induced cost increases and the revenue impact of supply disruptions on their businesses. One of the first choices many companies make to reduce costs is to cut discretionary spending, such as advertising. At this time, we do not know the depth nor the duration of this economic contraction. Historically, both chorus and the media industry experienced a quick decline in advertising revenues during the early stages of a recession, followed by an equally quick recovery when economic growth returns. On the Q3 call, I talked about a clear move by consumers away from the goods economy towards more service-based experiences given lifted COVID restrictions. For example, Canadians had pent-up demand for travel, and their outsized demand meant that airlines, accommodations and direct-to-consumer travel intermediaries have not returned to pre-pandemic advertising spend levels. Given that we are no longer spending all of our time at home, there are other interesting trends affecting advertising categories. Appliances, household supplies, food and beverages at home, furniture, and any items used in renovations are all seeing advertising spending down in step with reduced demand. Because Canadians are more actively enjoying their out-of-home experiences, there is understandably an increased demand for the fashion-related categories, attracting growing advertising expenditures by companies in the personal care, makeup, apparel, and accessories businesses. Supply chain issues in the automotive category persist, affecting demand throughout the year. That said, supply chains are easing. As imports across the country, container ships are offloading and inventories are on the move to warehouses for the coming holiday shopping season. This should attract advertising investments. Advertising categories that have been spending throughout the year are sustaining their momentum, such as financial services and gaming. As you can see, these many ebbs and flows are affecting the advertising market in many different ways. At Chorus, we've experienced advertising recessions and economic slowdowns before, and each time we have quickly moved to tightly manage our expenses in response. We are confident in our ability to manage these headwinds while at the same time executing our strategic plan. Moving to slide four. Our consolidated revenues were up 4% for the year at almost $1.6 billion with everything growing, including advertising, subscriber, and our content business. Total consolidated segment profit was $444 million for the year with free cash flow of $240 million. Despite the impressive progress we made in the first three quarters of the year to improve our financial flexibility, our revenue declines coupled with higher amortization of program rights in the fourth quarter resulted in year-end leverage of 3.02 times net debt to segment profit. John will take you through the detail in his remarks. On to slide five. Let me take a moment to talk about Q1. Our fall schedule is off to a great start. On Global, returning hit Survivor, 9-1-1, and CSI Vegas continue to rank as top choices for audiences, while the new series So Help Me Todd is the number one show so far this fall new to the schedule. Over on Specialty, Chorus currently owns the three most-watched overall specialty entertainment series, Alone Frozen, The Secret of Skinwalker Ranch, and, of course, Rick and Morty. New Peacock shows The Resort and Vampire Academy are proving to be audience drivers on our networks and Stack TV. And we continue to see success with our Chorus Studios originals such as Island of Brian and new series Dead Man's Curse. Over to slide six. There is a large adjustable market for video that Chorus is well positioned to benefit from in the years ahead. It includes audiences who consume our premium content on both linear and non-linear platforms. The audience trends are clear, as is the strong demand for premium video digital advertising. This market in Canada is large and growing. Canadians have more ways than ever to consume premium video content. Whether through their traditional set-top box, where two-thirds of Canadians enjoy their channel subscription, or through streaming and other non-linear on-demand services, one thing is crystal clear. Canadians love their video. In fact, in Canada, audiences are watching, on average, more than four hours of video content a day. Moving to slide seven. This year, we reached a company milestone. Recurring subscription revenue is now well over $500 million, and the combined result of our large traditional channels business accentuated by the growth of Stack TV. In Canada, when compared to the U.S., our channels bundle is a great value, with Canadians paying roughly half of what our neighbors to the south pay. We are experiencing only modest cord cutting of 3% per year, in contrast to much higher rates in the U.S., in part a function of the cost of the bundle. Our most popular specialty services have an important role in the lives of Canadians with big, highly differentiated channel brands such as HGTV, History, Showcase, Food Network Canada and W Network. And of course, our conventional network, Global TV, is a fan favourite yet again this fall, winning Monday, Tuesday and Thursday nights in core prime time and gaining momentum week over week. We are working with the BDU ecosystem to sustain the channel's business through investments in the global TV app for authenticated users and by providing premium video on demand offerings to enable binge viewing. And as noted previously, we are also working very closely with our BDU partners sharing data insights as we pursue opportunities in advanced advertising to improve targeting and effectiveness. The set-top box delivered traditional BDUs channels business is a large, recurring, and resilient one with smart industry collaboration that is enhancing the value proposition for both subscribers and advertisers alike. Over the years, investors have questioned whether we could secure future access to content, given the launch of OTT services for many of the same companies that partner with Chorus in our channels business. We have always been confident in our ability to secure premium video content, given our strong strategic relationships with the U.S. studio majors. We are pleased to share that we have done just that. In the last year, we have successfully renewed, extended, and expanded the content rights we acquire from our major content partners, such as Paramount Global, Warner Brothers Discovery, The Walt Disney Company, and NBCUniversal. Not only have we ensured the viability of our largest networks well into the next licensing regime, we have also successfully acquired new rights to pursue the many premium digital video opportunities that we've identified in our plan. So what does that mean? Over to slide eight. As you know, Chorus is the exclusive partner for Peacock in Canada, and this content drives audiences to our linear services and acquisitions on Stack TV. In recent years, we have made smart strategic moves to build a streaming portfolio, opening the door for Chorus to participate in that large, growing digital video market I just described. And today, we are pleased to make some exciting announcements. We will soon add the Disney suite of services to Stack TV, further enhancing its value proposition and driving new subscriber acquisitions. We have secured the modern library content stacks of several of our hit CBS shows on Global, such as FBI, NCIS, CSI Vegas, and Ghosts, which will also be added to Stack TV to create more value to subscribers, as well as to the Global TV app for authenticated subscribers to our channel's business inside the BDU ecosystem. This fall, we successfully rebranded Nick Plus to Teletoon Plus, transforming a popular historic chorus cartoon channel brand into a powerhouse animation OTT streaming service. To accomplish this, we secured a groundbreaking multi-year all rights deal with Warner Brothers Studios and Cartoon Network, part of Warner Brothers Discovery. Much of this expanded offering of multi-platform content will window across all of our streaming services before landing on the newest platform, Pluto TV. Our recently announced plans to launch Pluto TV, the world's leading fast, free ad-supported streaming television service in Canada, on December 1st with Paramount Global is yet another way we are putting more content in more places while providing new opportunities for advertisers. Three years ago, we launched DAG TV, then the refreshed Global TV app, followed by the Global News OTT streams, all of which are now available across multiple platforms with further expansion opportunities ahead. These, along with the addition of Teletoon Plus and the soon-to-be-launched Pluto TV, have enabled us to build a powerful streaming portfolio to participate in the rapidly growing premium digital video marketplace with the full support of our largest content partners. This is why we are so excited for the future growth prospects of our premium digital video offerings in Canada. Moving to slide nine. It's been a record year for our content business. We have made meaningful progress expanding our studio offerings with a strong slate of shows from Nelvana and Corey Studios and adding new and complementary genres with the addition of aircraft pictures and waterside studios. This expanded slate of content has resulted in increased revenues in the international marketplace with major distribution partners such as Hulu, Netflix, and others, a nod to our creative talent with big multi-season orders of our hit shows. Over to slide 10. There are three large categories of costs I would like to address before turning over to John to provide more further detail. The first category, as I've just discussed, is the smart investments we have made to renew, extend, and broaden programming deals with our U.S. content partners. These investments ensure the long-term viability of our channel's business and enable us to pursue attractive new opportunities in the fast-growing premium digital video marketplace. They also result in some programming cost inflation, but these are smart investments that secure our strategic position as a multi-platform content intermediary. The second cost category is most definitely not what I would characterize as strategic programming investments, but rather regulatory programming cost obligations. These result from the dated, regressive spending obligation that binds Chorus, while our trillion-dollar, market-capitalized, foreign-owned internet media broadcasters and competitors enjoy unfettered and unregulated access to our market. As you'll recall, our broadcast regulator decided the summer before last the course would be required to make up the approximately $50 million in Canadian production expenditures that we could not spend given the COVID-19 pandemic and related production shutdowns in 2020. This unexpected decision to make us spend more on Canadian programming in a challenging economic environment will result in ongoing margin pressure in fiscal 23 and fiscal 24 just as it has in fiscal 22. The final cost category that every company in every industry now must address is the challenging labor market as well as the additional costs as we all return to work, which of course we have described as the future of work. Our investments in flexible work arrangements, in travel to see our teams and our clients, and in the ongoing support of the well-being of our people remain paramount to our future success. And like other companies, we are seeing increases in these and related expenses as COVID-19 restrictions are relaxed. With that, I will now turn it over to John to discuss our Q4 and year-end results.
spk02: Thanks very much, Doug. Good morning, everyone. I'm starting on slide 11. As Doug mentioned earlier, the uncertain economic environment that emerged this past summer is impacting advertising demand, and that's contributing to lower consolidated revenue of $340 million. in our fourth quarter. For the year, we delivered consolidated revenue of almost $1.6 billion, and that's a 4% increase from the prior year as a result of strong revenue momentum in the first three quarters of the year. Consolidated segment profit was $56 million for the quarter and $444 million for the year. And as a reminder, in the prior year, we did benefit from over $23 million in wage subsidy and regulatory fee relief that did not recur this year. As Doug has just underscored, we are also incurring additional Canadian programming costs as a result of that negative CRTC decision in August of 2021. And this amounted to approximately $19 million for the year and $8 million for the quarter. The decision to catch up on approximately $50 million of CP underspend has been and will be a drag on our margins for F-22 through to F-24. But then it will pass. Consolidated segment profit margins were 17% for the quarter and 28% for the year. Given the current macroeconomic environment and as a result of annual impairment testing, in the fourth quarter we recorded a non-cash goodwill impairment charge of $350 million in the television segment as detailed in our MD&A for the fourth quarter and year-ended August 31, 2022. This is reflected in the consolidated net loss attributable to shareholders for the quarter of $1.82 per share and $1.19 per share for the year. Adjusting for this charge results in adjusted net income attributable to shareholders of $17 million, or $0.08 for the year. We delivered strong free cash flow of $45 million in the quarter, and that's an increase of 27% over the prior year quarter, and $240 million for the year. At current trading levels, this represents a free cash flow yield of over 50%. Net debt to second profit was 3.02 times at August 31st, 2022, and that compares to 2.76 times a year ago. As we look forward into Q1, a reminder that our free cash flow benefited from a $43.5 million distribution from a venture investment in the prior year first quarter. Now let's turn to our TV results for the fourth quarter and year as detailed on slide 12. Overall, TV segment revenues were $314 million for the quarter. That's down 6%. Well, for the year, revenues of $1.5 billion were up 3%. Although TV advertising revenue was meaningfully lower in the fourth quarter, for both the full year, TV advertising revenue grew by 2%. We also experienced positive year-over-year uptake of our streaming services and delivered a substantial increase in content revenues for the quarter and the year, reflecting the revenue diversification benefits of our portfolio of businesses. Q4, TV advertising revenue was down 14%, reflecting lower advertising demand throughout the summer months, as Doug has just discussed. Subscriber revenue increased 2% in the quarter and came in at a record $518 million for the year. That's up 4% compared to last year. This impressive result was driven mainly by increased year-over-year demand for stacked TV. As mentioned last quarter, seasonality trends were evident in the demand for our streaming services over the summer. This trend has reversed in the fall, and our focused investments in streaming subscriber acquisition strategies and the launch of our strong fall schedule has resulted in an increase in trial and paying subscribers in recent weeks. As we wrap up several weeks of premieres, and we remain focused on getting to our target of 1 million streaming subscribers. Distribution, production, and other revenue increased 4% for the quarter and 8% compared to the prior full year. This growth primarily reflects the addition of aircraft pictures in February of this year. Given macroeconomic conditions and other risks as well as a tough comparable of 16% TV advertising revenue growth in Q1 of last year, we currently anticipate some year-over-year softness in TV advertising revenue including lower television advertising revenue for the first quarter of the new fiscal. While the duration of current macroeconomic conditions is uncertain, our team remains focused on adeptly managing through the challenging period just as we have in the past and positioning us for the eventual recovery. Direct cost to sales was up 15% for the quarter and 16% for the year, and as we've noted previously, this encompasses a significant increase in amortization of program rights, which was up 13% for both the quarter and the year. The increase reflects our purposeful investment in U.S. studio output deal renewals, which provide us with extended terms and broader rights to pursue attractive digital video growth opportunities, as well as increases in costs from the ramp-up of Canadian content production driven by the CRTC's catch-up decision. which represents approximately half of the higher cost in Q4. Investments in U.S. content support our longer-term strategy to drive top-line growth and revenue diversity by expanding our offerings for both audiences and advertisers. Looking ahead to fiscal 2023, we anticipate that programming costs will grow modestly on a full-year basis, with approximately half of this driven by the CRTC's catch-up decision. We will seek to match audiences with advertiser demand whenever possible as part of our cost management efforts. Film investment amortization increased by $2 million for the quarter and $11 million for the year, and that's mainly as a result of the addition of aircraft and an increase in episodic deliveries from in-house production. Other costs of sales growth of $3 million for the quarter and $9 million for the year resulted from costs associated with certain sales initiatives which are correlated to the associated revenues. TVG&A expenses were up $9 million from the prior year quarter and $53 million for the year. And as a reminder, again, last year included $20 million of federal wage subsidy and regulatory fee relief combined for the TV segment. In addition, in the current quarter, G&A mainly reflects an increase in advertising and marketing investments to promote new program launches and stack TV, some increased people costs and expenses related to streaming, digital services, system initiatives, future of work, and other areas. Overall TV segment profit was down in the fourth quarter and year. In the fourth quarter, this was primarily a result of the contraction advertising demand, higher amortization costs for programming rights and film investments, and the G&A expense increases. TV segment profit margins were 19% in the current year quarter, 31% for the year, and that compares to 33% and 38% respectively in prior year comparable periods. As detailed on slide 13, our new platform and optimized advertising revenues continue to grow as we deploy more content in new ways and the adoption of advanced advertising solutions gains traction. New platform revenue was 12% or $33 million for total TV advertising and subscriber revenue in the fourth quarter and 10% or $142 million for the year. The continued growth reflects the disciplined execution of our strategic plan as we deploy our expanded content rights in new places and connect with audiences in new ways to drive additional sources of revenue. Optimized advertising revenue was also up significantly in Q4 and for the year, representing a new milestone of 50% or $77 million of total television advertising revenue in the quarter, and 43%, or $372 million for the year. This is an increase of 26% from the prior year quarter and 41% from the last full year, reinforcing our leadership position in the transformation of how television advertising is sold. Next, let's turn to our radio results, which are outlined on slide 14. Radio was relatively resilient in the fourth quarter despite the challenging advertising market, with the recovery continuing for the full year. Radio segment revenue is flat for the quarter and up 9% for the year, and that's a result of strong local revenues offset by the impact of broader macroeconomic conditions on national sales. Radio segment profit decreased $2.6 million to $1.7 million in the quarter and $0.8 million to $13.3 million for the year. The normal occurrence of government-related pandemic relief, along with some increased people costs and sports rights costs, are the primary drivers of increased expenses for the quarter and year. Radio segment profit margin was 7% in Q4 and 13% for the year. Over to slide 15. Looking back on the year, we are pleased with the steps we've taken to strengthen our capital structure, which included a second high-yield note offering in Q2 and the amendment and extension of our bank credit facility in early Q3. We built a strong financial foundation to support the advancement of our strategic plan while enhancing our focus on shareholder-friendly activities. Despite the macroeconomic challenges impacting advertising revenues, our goal to drive net debt to segment profit below 2.5 times over the longer term remains in focus. As a reminder, we have now paid down over $735 million of total debt since the changes to our capital allocation policy took effect in September of 2018. With the amendment to our credit facility this past year, we no longer have mandatory bank debt repayments. However, in Q4, we did continue to make optional repayments. In August, We announced an increase to the size of our normal course issuer bid to 10% of our public float, and that's up from 5% previously. This move was intended to create additional flexibility. At the end of September, we had repurchased approximately 8.6 million shares, representing 44% of the amended NCIB. And this morning, we issued a press release declaring our December 22 quarterly dividend of six-tenths per share for Class B shareholders, providing a very compelling dividend yield of 11%. As a reminder, we paid out approximately $50 million for the year, representing a dividend-payer ratio of just over 20%. These shareholder-friendly activities of paying down debt, buying back shares, and paying an attractive dividend were an aggregate $189 million for the year. And since our new capital allocation strategy was introduced back in September of 2018, this amounts to $975 million. While we manage through this challenging economic environment, as we have successfully done many times before, we do so with a stronger balance sheet and a commitment to carefully managing our expenses and our cash. We have a strong record of prudently managing our business while maintaining focus on positioning cores for the future by investing in the business, delivering, and providing attractive returns for our shareholders. We're confident in our long-term plan and in our team. With that, I will turn it back to you, Deb.
spk04: Thank you, John. Finally, over to slide 16. On today's call, we wanted to acknowledge the immediate realities of the advertising recession and provide some detail on costs. Our focus on expense control is resolute, as is our pursuit of the premium video multi-platform content opportunity in Canada. We have made smart investments to renew, extend, and broaden the content rights we acquire from our U.S. studio partners that will ensure the resiliency of our channels business well into the next regulatory regime. Importantly, it sets the stage for continuous growth as measured by our new platform revenue metric. Our streaming portfolio now includes Stack TV, the Global TV app, the Global News OTT offerings, the newly debuted Teletoon Plus, and soon the launch of Pluto TV. That is most certainly more content in more places. Our efforts to transform how we sell media is evident, and our optimized advertising revenue metric now exceeding 50% for the first time this past quarter. That is another milestone achievement. since we began reporting this metric almost two years ago. We have made measured, purposeful progress in expanding our own content offering, adding aircraft pitchers and waterside studios alongside core studios in Nelvana as we remain focused on international opportunities licensing our content. We have demonstrated a focus on shareholder-friendly activities given our company's substantial free cash flow, as evidenced with a free cash flow yield of over 50% based on yesterday's closing share price. Our leadership team, of course, and all our people have adeptly managed through difficult environments before. I am confident we will successfully do so again. Our immediate focus will be to balance the execution of our strategic plan as we tightly manage our expenses. Thank you, and over to you, operator.
spk06: Ladies and gentlemen, if you would like to ask a question, you can signal by pressing star 1 on your telephone keypad. Do keep in mind, if you are using a speakerphone, please make sure the mute is released so that signal can reach our equipment. Once again, for questions today, star 1. And we will begin with Adam Schein with National Bank of Canada.
spk03: Good morning. Maybe three quick questions. The first, Doug, this might be purely semantics, but back on the September 9 press release, you talked about a view of meaningful year-over-year softness in TV advertising. You and John on the call today and also in the MD&A are talking more about sort of some softness. So again, maybe just purely semantics, but curious if over the last six weeks or so, anything has changed in terms of how you actually performed over the past six weeks and maybe how some of the evolving bookings are going. That's the first one.
spk04: Thanks, Adam, and nice to hear from you. I would say the ad economy is still very choppy. I tried to give some color on the many ebbs and flows within, you know, the various product and service categories. They're all over the place. I mean, I've talked to a number of CEOs whose businesses are just sort of rolling around right now, given sort of the realities of the pandemic, supply chains, restrictions being lifted, consumer preferences, etc., etc., So I would, you know, I'd be reluctant to give any sort of forward guidance other than to say the choppiness kind of remains. But we seem to have sort of leveled off, put it that way, where we've kind of found a sort of a stable kind of this type trend, a reset, you might want to say. But from there, I would just be somewhat more on the choppy side going forward as a discussion.
spk03: Okay. One more for you, and then I'll save another one for John. But just for you, just in regards to two things, we could start maybe just in regards to Netflix as supported tier coming next month. It's only about five minutes per hour. The company, by its own admission, is saying that, you know, obviously it's going to be a slow sort of ramp. But maybe talk to sort of what you might be hearing out there in regards to receptivity from advertisers. And at the same time, juxtapose that with obviously your ongoing enthusiasm regarding the launch of Pluto TV early December.
spk04: Sure. First off, I would say that we've been competing with large foreign digital advertising giants for over a decade, and so this is just yet another one. Secondly, these approaches that those big majors are applying are for global markets. It's a programmatic sort of approach. They have no ability to do advertiser integration. They have no end-to-end sales functions or capabilities. They don't have 250, you know, awesome sales people like we do, of course, that can really manage relationships with all of our advertisers and agencies. And so, you know, I'm obviously aware they're coming to the market. I'm also told they're trying to extract premium CPM, which I don't think is going to work very well for them. So, you know, we'll watch them, Adam, but I'm not losing any sleep over it.
spk03: Okay. Do you want to talk at all incrementally on Pluto in terms of how early receptivity is going, or we'll just wait for that more on the Q1 call?
spk04: Well, I think the note I really wanted to hit, today we want to talk about the immediate challenges we're seeing and our confidence in managing through them, but really to set the table for our streaming portfolio, which is very massive. We're coming out of the shoot for this year. with a really strong, you know, expansion of Stack TV with new services being added, the Disney suite of services. Teletoon Plus is a powerhouse animation service, which is really getting some great traction. We're adding a whole bunch of in-season Stack content from our partner at CBS to both Stack TV to improve its value prop in addition to Disney Plus, the global TV app. And we're launching Pluto. which will benefit from both our content, of course, and 20,000 hours from Paramount Global. So it's the suite of our streaming portfolio services that I think is the note here. Your specific question on Pluto, yes, very well received. I mean, you know, Canadian advertisers have been clamoring for premium digital video inventory for years now. And the fact that we can sell our entire portfolio of media, you know, and add a big digital offering across five different streaming products, and let's not forget the Global News OTT app, which continues to grow, is, I think, a great and very competitive offering. So we're excited about the early appeal of Pluto. But the key here is to think of the larger portfolio as opposed to just the Pluto TV launch in and of itself.
spk03: Okay, maybe just for John then, because I know you touched on it, John, just in regards to the streaming services, specifically on the subscriber count, you didn't give that for Q4. I don't want to put words into your mouth, but I'll presume that there might have been a bit of a decline, at least Q over Q, but year over year growth nonetheless in Q4. I think there was a bit of a delay from Q3 into July in regard to a subscriber acquisition program. I don't know if you might have touched on that. I might have missed that earlier on the call, but Can you maybe just touch on some of the cadence and the progress going into Q1? Because obviously, I think you've had Fubo in the mix basically since early August, I believe.
spk02: Yeah, we have. And that's been doing quite well actually out of the gate. I'd say the way I describe it is that we talked about this even on the Q3 call. There's definitely subscription seasonality in what we see in stack now. But I think the good news is It's not that there's a big uptick in churn. In fact, churn has been going down through the summer. And it's not that there's a decline in the conversions from preview to paid. What we really saw, I'd say, for the last four or five months was a decline in gross ads and a bit of a decline in win-backs, which is very related to gross ads in a way, because that tells us about the appeal of the content offering and what new content we have. So I wouldn't say we're at a point now where we're declining at all. In fact, really since the fall launch, starting with some of the specialty content and now a full slate on global, we're seeing actually very strong weekly growth in stack, and that's weekly paid growth as well as a nice number of preview customers with us as well. So, yes, it has been a slower period through the summer, but we're getting definitely some good momentum right now.
spk06: Super.
spk03: Thanks for that.
spk02: Thanks, Adam.
spk06: We will now move to our next question, which will come from Vince Valentini with TD Securities.
spk05: Yeah, thanks very much. Let's start, just pick up on the Netflix question from Adam. If you can refer back to your slide six in your presentation. Obviously, digital video advertising is now a substantial... and growing faster than linear TV, obviously. Do you actually view Netflix as a competitor for your linear TV advertising sort of inventory, or is this just expanding the pie and whatever Netflix or Disney Plus get on advertising really is just part of that overall digital category and ebbs and flows from social media and Internet giants online? already take, which is dramatically higher ad spend in Canada than linear TV.
spk04: Yeah, I mean, digital, I think, is 60% of the media mix, right? So that Netflix, I don't see them, I see us competing with Netflix in digital premium video inventory. So, yeah, we're both going after that larger upward sloping line where there's massive growth and a huge market. with a lot of demand for the difference between user-generated. People aren't so sure they want to put their content next to cat videos, but they would love to put their content next to Peacock or some of the CBS hit dramas. And that's where we're going, and that's where Netflix is going, and that's where Disney Plus is going, and that's where Discovery Plus is going, because that's where the demand and the money is. So that's how I would look at that, Vince.
spk05: Absolutely. If AVOD works well, it's working well, but if it continues to work well and the inventory of AVOD for media buyers increases, is it not logical to assume that there's going to be some share shift from other forms of digital, whether it's just banner ads or more traditional web advertising, shifting to something that's far more premium and targeted in a CTV or AVOD world? Totally.
spk04: I mean, I think banner ads and even social media advertising, I think, is clearly going to be under some pretty significant pressure. I mean, look at Snapsprint, you know. So, yeah, no, I think that's why I love our shape. I love our shape here with having, you know, acquired all this great premium video content and our ability now to put it on all these great streaming platforms. Everybody positions us to fish where the fish are. In addition to, of course, offering... a full suite of advertising solutions across all of our media assets, right? So that's because we still want, you might have heard P&G, you know, their CEO this week talking about how he's redirecting advertising to wide reach and frequency media, that means television, because they see the value in having the top of the funnel presence. And so what we're doing at Chorus is being able to build, and we already have a massive top of the funnel footprint, plus we're building out the bottom or the digital piece of the funnel too. So I think it's a good, very strong addition to our kind of advertising solutions base and I think the demand is going to remain pretty strong. I know for digital, and even now we're seeing from one of the world's biggest advertisers a nod to the importance of television.
spk05: Okay, and just back on advertising demand for Q1, to revisit that question, are you saying we should expect things to be as bad as the fourth quarter, like minus 14% or potentially even worse? temporarily. I just want to make sure I'm reading your commentary clearly.
spk04: Yeah, no, and thanks for asking the question, because as I was reflecting upon my answer to Adam, I would have probably added another note, so I'll do it here. We've stabilized, and I would say we'll be better in Q1, and it looks like if we look out for the year, things will slowly sort of be on the improve. It appears at this point in time, but You know, it's very volatile. You know, when you're a CMO and you're looking to pull back on your ad spending, you typically cancel digital first because it's easy to cancel. But the bookings are better in Q1, relatively speaking, than we saw in Q4. I'll say that.
spk02: And, of course, I have to caveat that, Vince, we're just about halfway through the quarter. Exactly. But from where we sit today, that's what we see.
spk05: Okay. And then on costs. Okay. I think you said you wanted to provide some clarity on cost optimization, but I'm not really sure we got any from the presentation. You identified some buckets, but I mean, can you quantify anything? Is there some discretionary costs, whether it's travel and entertainment or certain areas of headcount that you can maybe start to address? And for sure, if you can talk about content spend, the CPE, I think you've well identified, but But what about U.S. suppliers? Are we seeing any reduction in the amount of new episodes you may have to pay for, or is there anything else you can do on a discretionary basis to attack those costs? I mean, if you have no visibility on ad revenue and things could be down circa 10% for the year, I assume there needs to be some effort to try to get costs down.
spk02: Yeah, absolutely. So a lot of categories in there, Vince. Let me just go through them. So TV programming is obviously our biggest expense by a lot. So some of those things you mentioned in terms of, we call foreign, but U.S. content, in terms of timing. Right now, volumes aren't indicating that they're going to be reduced, not from our major suppliers anyway. And, of course, a lot of our content, particularly on specialty, comes on long-term output deals. And because they're multi-year deals, the way those run through the P&L, that gets set at the beginning of the deal, and that will just amortize through. So that's a time-based amortization. Things that are more on a per-play or a per-show basis, yes, there's potentially some opportunity there on reduced volume or on timing. So we're looking at all of those things for sure. And again, as I said, we're trying to match our supply of ratings with the demand for those ratings. So that gets into the whole timing question. I'd say on some of our other costs, The G&A side of things, I think we're leaving no stone unturned there. We're engaging the whole team to cut everything we possibly can right now, just given what you mentioned on the advertising environment. Our goal is to have every category other than programming down year over year. So that's not going to play out exactly the same way every quarter, nor is programming going to play out the same way every quarter. But that's our goal right now is just to continue – to mine every single opportunity we have as we continue to see the advertising picture. Once it perhaps improves, then we'll be able to invest a little bit more in hopefully further improvements in advertising, but right now we're in that mode of really just looking at everything. So I know that's not the exact detail you want, but there's 20 categories of cost reductions that are either now happening or well on their way.
spk04: Yeah, I'll just cover a little bit. We began to see some of this softness in the late summer, and that's why we put that media advisory out. And weeks before the advisory, we were all hands on deck, basically taking every piece of discretionary expense out and balancing, as I said, balancing a very aggressive cost position with the realities of some costs we can't address. You know, the foreign programming is an investment, not a cost. And the nuance I think you got, Vince, was the CPE is a complete cost. And we want to make sure that the future of work that we provide for our people with flexible work arrangements and the related costs in that regard. But with those said, you know, we've been very, very aggressive. So we don't guide on revenue, really won't guide on expenses, but we will tell you that we're leaving no stone unturned. And we're also not – we're very focused on launching the streaming business because we know there's growth there, right? So that's sort of the balancing act that we've taken on.
spk05: Thanks, Doug and John. The sub-question on programming costs is, a Disney product being added to Stack TV. Correct me if I'm wrong, but you initially did not have digital rights in Canada to be able to do that. Is that something new that you've negotiated for, and therefore in some places you're actually strategically increasing programming investments deliberately, even with the macro backdrop?
spk04: Yes. Yes. 100%. So I think this is something, and Ben, we've talked about this before, right? One of the investor worries is, well, why won't one of these guys take all their content one day and just put it on their own platforms? And I've always said, no, it's never going to happen because the content licensing business is important. The fact that we're able to strategically align with Disney to put their channels in our Stack TV, which we've described as a re-aggregation of our channels package on a streaming platform, I think is a real win. And it's a real testament to the fact that our business model is very resilient. It's got a long tail in Canada. It did come with some investment. But at the same time, it opens up the opportunity to kind of leg up on our Stag TV growth because now Disney's got such a strong brand awareness, and our subscribers will benefit from that. So that's but one example. I named a couple others of smart investments that bring with it some inflation. But it also not only does it renew and extend our term well into the next licensing regime, but it also gives us sort of open fodder to go after that digital video market that we just talked about on page six.
spk05: Great. I have one last two-part question. Sorry for so many questions, but a lot of concerns from investors these days given what the share price has been doing. So I want to make sure I get this on the record. Okay. Dividend, is there any risk that you cut the dividend this year, either because the yield is too high or because of the challenging revenue and advertising market? And part B of that is, have buybacks stopped temporarily until you see some relief in the ad market, or do you expect to continue buying opportunistically?
spk02: With on the dividend, as I mentioned, we did declare the end of December payment. It's always subject to board approval every quarter, so I guess the way I look at it is the payout ratio is under 20 or 20-point-something percent, just over 20. The free cash flow you see for the year was very strong, and that's sort of the always position on the dividend is that it's subject to board approval, but the metrics certainly point to a very strong position in that regard. On the buyback, we're still in a blackout. period, which means we're in an automatic buying mode. When we come out of that, we'll look at it, obviously, almost day-to-day, just managing our cash position and what we're seeing, as you mentioned, on advertising. The one thing that we've struggled with a little bit from a cash perspective that's actually helped us is the programming costs. Even though we were basically flat on a cash basis in Q4, we're still running a little behind on cash out the door in programming, and that's simply a case of how the studios in the U.S. invoices. So you can read that as being quite late and quite, again, choppy. So we're seeing a bit of catch-up on that now in Q1, so we just have to watch that as well.
spk09: Thank you.
spk02: Thanks, Vince.
spk06: Our next question will come from Mar Yagi with Scotiabank.
spk07: Yes, good morning, gentlemen. Thank you for taking my questions. I want to go back to, sorry to belabor this, but on the Netflix question, Doug, you mentioned that you are not worried about advertising dollars going from linear to Netflix. I'm kind of trying to understand a little bit this concept because when I look at the spread, Netflix, when they launched their product, they said, The pricing for the ad-supported tranche reflects the demand that they're seeing in the marketplace. When I look at the Canadian pricing for the ad-supported version, it's the widest versus all the other countries, or one of the widest versus all the other countries that they're launching in, which implies that they're seeing a lot of demand in the Canadian marketplace for this product. When I look at the number of individuals watching TV, why would an advertiser who is currently putting ads on linear TV not move dollars to Netflix when it's the same customer who is switching and watching Netflix on his couch and sometimes watching linear TV? Why would an advertiser not switch their advertising dollars to target that exactly same customer.
spk04: My answer to your question, Maher, is that we've been contending with competing in the media model mix for our entire 15 years at Chorus. So, you know, the digital piece is digital, the radio, the television. We don't have outdoor. We don't have print. The fact of the matter is every media mix model or every CMO runs his or her ROI calculation, and television is always in the mix. It's not an either-or. It's always an and. And so our job is to provide added value to their buys on linear television, and that includes such things as integrations, You know, it includes those things as the ability for us to provide a social digital agency like Soda, which is, by the way, nominated as one of Canada's best social digital agencies. It's five years after we launched it. We have 115,000 kin YouTube influencers we add to the mix. So it's a suite of advertising solutions we provide. Netflix is, you know, they're just going to have one offering. It's going to be a programmatic offering. And that doesn't necessarily provide the wide reach and frequency that television does. And they don't trade on an industry-acknowledged currency. So I think, yeah, sure, I don't doubt that CMOs are going to trial Netflix, sure. But this is no different than us competing with Google or Facebook or Instagram or any of the other digital media advertising platforms. It's just another competitor. And, you know, we continue to improve our offerings now with a very impressive suite of streaming portfolio services to compete with Netflix for ad dollars.
spk02: I think, Maher, also in your commentary, I think you partly answered your own question because if Netflix is priced at that much of a premium, it makes linear television actually very cost-effective. So it's on us to prove that it's as effective a form of advertising in terms of its ability to convert advertising spend into revenue dollars for our clients. But I think by pricing at such a premium, that in itself will contain some of the movement just again, because of cost efficiency of an overall campaign, as Doug mentioned.
spk07: Okay. And is there a view, can you share your views on how the CPM market for TV advertising on linear channels is behaving these days? Are you seeing any pressure on CPM right now?
spk04: No, CPM, we as an industry have seen Generally increasing CPMs the last number of years, and that kind of trend continues. Again, I just come back to my earlier comment. Top of the funnel, wide-reaching frequency impressions are of great value. And, you know, we provide – again, the other thing I would just note also in terms of when you're buying television is you're buying that whole mass of 55-plus audience that isn't necessarily measured in the metric, but it's out there, and that's where – a lot of the wealth is, right? So that's kind of a piece of the puzzle that we provide a gift with purchase, if you would, with advertising. So the CPM market is remaining healthy here in Canada.
spk07: Okay, and maybe my last question on radio. Have you heard or do you have any expectations that the CRTC will finish reviewing or start even reviewing the radio market? market in Canada in the possibility to change some of the policy and regulations there. I know it's been taking a long time. Have you heard any development on that?
spk04: I've only heard what you heard, is that soon is what we've all heard. And how to characterize what that is, your guess is as good as mine.
spk07: Sometimes soon is not soon enough.
spk04: Yeah, well, yeah, I'll make no comment on that because I know our friends at the commission are likely on the phone. But, yeah, who knows? We'll wait.
spk07: Okay. Okay, thank you.
spk04: Thank you very much.
spk06: We'll now take a question from David McFadden with Cormark Securities.
spk00: Hi, guys. Just a couple of quick questions. Just following on the outlook for Q1, I know you said that you expect it to be down. relative to... Sorry, it'll be down, but not as down as Q4. So is it a reasonable probability that the advertising revenue could be down double-digit in Q1, or is it just too early to say right now?
spk02: Yeah, I think it's too early to call that. We've tried to be more precise in the past, and it's never turned out well. So I think we'll leave it with what Doug mentioned.
spk00: Okay. And then... you had a large goodwill right off there. Was that related to any specific assets, or is that just a general charge against TV overall?
spk02: Yeah, it's just TV overall. You'll see it's on the goodwill, so it's not specific to any particular license or station or anything like that. It's just an overall value.
spk00: Okay. And then lastly, just on the programming spend, so I think you indicated earlier on the call that about half of the increase on programming spend is the CP catch-up, and then half is the U.S. investment spending increase. Is that correct? Yes. Okay. So if the CP catch-up isn't, or the amount there, isn't that going to be about $25 million, or is it going to be more towards $30? Or $23?
spk02: Yeah. No, it won't. Well, look, as I said, this year, sort of 22, the year it just finished, was just under $20 million. So it's probably similar to that. It's going to get spread a little more now because the license got extended for two years. So the license has got extended for two years. So it's likely in around the 20 zone again, maybe a little more.
spk00: Okay, so we should expect a programming increase overall for the year something like 40 to 45 in that zone?
spk02: A little high.
spk00: Okay.
spk02: And again, subject to some of the earlier discussion about timing of deliveries and quantity of deliveries and all those things. I mean, at this time of year, that's always the wild card that we have in terms of the year-over-year. So right now, between Canadian and foreign, that's why we say sort of in the middle of that, but not as high as 22, because in 22, we had the big ramp in global in Q1.
spk00: Okay. And then if I can just ask one more. What's your outlook on the merchandising distribution and production business for fiscal 23? Are you expecting continued growth? Could it be double-digit?
spk02: I think yes to both, just, you know, given some of the things we've done and what we see on the slate. Again, it's lumpy between quarters. So, you know, this quarter just reported was a bit lower. We had a big quarter in Q3 last year. So you'll see it'll be different quarters potentially this coming year, but it's going to be – you know, a full year of aircraft and, you know, a lumpy pattern as we always seem to have based on delivery. That's just the fact of life in the content business.
spk04: Just maybe if I can just add some more colour to that answer, just the fact that we're really excited about the portfolio there too. So we're trying across the company to build the video capabilities both domestically but also internationally. And so very carefully slotting in specific sort of genres and slates to address hotly demanded product, you know, is I think a smart play. And we're just positioning our business for the future so that we can, you know, once we understand, you know, what the new regime looks like from a spend level, we'll then be able to, you know, more smartly pursue the studio content revenue opportunities internationally.
spk00: Okay. All right. Thank you.
spk04: Thank you, David.
spk06: Next, we'll hear from Aravinda Galapathy with Ken Accord Genuity.
spk08: Good morning. Thanks for taking my questions. I'll start with just to finish off on programming. You've indicated sort of modest growth in programming cost in 2023. Can you maybe just talk to, and I think, John, in a previous point you made, you kind of alluded to the distribution a little bit, what the cadence of that could be. Obviously, it depends a bit on the CPE catch-up shape as well. Any kind of commentary on that that you can share?
spk02: I mean, again, so let's just look at 22, what happened. So big Q1, that was predominantly because the prior year in 21 had almost no new fall shows on Global because of the whole pandemic shutdown that was going on through that summer. But, you know, if you take that out of the mix, we ran, I think for the back three quarters of 22, we were up 8%. I think after Q1 we said, you know, think 10%. So, yes, Q4 was higher. A bunch of that's Canadian, and that, you know, typically we do spend more of our Canadian in the fourth quarter. So, you know, it's going to be, again, a little lumpy. I think Q1 tends to be a little higher. But, you know, it's not going to be an exact, you know, straight line across the whole year. But that modest number, if you think of that overall – you're going to be probably plus or minus 3% or 4% in any given quarter from that midpoint for the year.
spk08: Okay. And then just on the streaming platforms, I mean, you've talked about sort of all those initiatives and the trends in terms of subs and so forth. I mean, at a certain point, I guess, Doug or John, I mean, do you plan to give the street some sort of indication as to the profitability of not just at the gross level, but below that line item. I mean, there's obviously some sort of allocation you'd have to do in terms of programming. And, you know, of course, as a company, that's assessed based on EBITDA. So, you know, I think investors want to know what kind of profitability or kind of potential profitability can be accrued from these streaming assets. Do you plan to provide any kind of color on that down the road? I realize that maybe it's still early days, but at some point, I guess there might be an expectation. I just wanted to get your thoughts on that.
spk04: No, that's a good question. A couple comments on that. I mean, one of the, I think, smart things we've been able to do is leverage our core business, you know, to acquire these adjacent rights for digital businesses. So, you know, we would probably never get to the table on any of these new streaming opportunities if it hadn't been for the fact that we had a substantive linear business, you know, already with meaningful, you know, strategic projects business partnerships and money is flowing back and forth across the border with our U.S. partners. And so, you know, it's hard to necessarily show a direct P&L on it because, you know, we leverage existing spend levels to acquire incremental rights. So that's when you look at our EBITDA margins, you know, compared to our U.S. peers, we're top quartile compared to any of the U.S. majors. Our margins are – I'm very proud of those margins, and that's because of the way we, you know, we kind of – We take advantage of our linear scale to participate in the digital. So whether or not – I don't know if we'll ever report profitability. We know that, of course, in the States, those folks going direct-to-consumer need to do that, and those are not good-looking businesses right now, and we're pleased to not be in a hemorrhaging situation on that type of a model. We're smartly leveraging the core to participate in the new digital in a very cost-effective manner. It's more likely in the future we'll think about reporting, you know, maybe time spent or other things like that. But right now the key metric to look at is new platform revenue. That captures that. And then that's been consistently growing over the years. And you should expect that to leg up as we launch more of these streaming services in the coming years.
spk02: I mean, Urban, we have talked in the past about the fact that on the new streaming products, There are some incremental costs that come with it directly, but they're relatively small. The contribution of those additional revenues tends to be very high.
spk08: Thanks, John. And then just a last question on working capital. I mean, I know we've talked about individual quarters instead of the ups and downs, but if we just take a step back, when I look at 2022 fiscal and 2021 fiscal, I mean the working capital use in 22, 77 million or 50 million in 21. And then you need to throw in the, the, the, the, the variance between your program and the actual cash spend. I mean, that goes up to like a hundred million in 20 or under a hundred million in 22 and then 85 or something like that in 21. And that's a lot of working capital use for, you know, in a, in a, in a top line challenged backdrop. I mean, I'm trying to get at is there some kind of recovery that we should expect rather than, I'm not talking individual quarters, but over the next couple of years in general?
spk02: It's a very good point and something that I find extremely challenging. When you look at the biggest swing in 22 over 21, so we did a good job in receivables and mining some cash out of the receivables portfolio. Our DSO is as low as I've seen it since I've been a course. So that's a place where we always look to turn that working capital investment into cash. But the other big swing was on the payables and accruals line, and that's as much about what was going on in 21. Actually, it's all about what was going on in 21 versus what was going on in 22. And by that, I mean we had some fairly large accruals at the end of 21. that became cash out the door in early 22. So that's always possible to happen. I don't feel like that's going to happen in 23. I think we might be a little bit better positioned in 23 on the kind of liability side of things. But it's hard from quarter to quarter to really predict that. And my earlier comment about we're totally at the mercy of how we get invoiced. by the U.S. studios. I'm not going to pay a bill I don't have. So at the end of the day, you pointed out exactly, Eric, like on that programming cash versus programming AMORT line, that's the one that we have a hard time predicting the cash side of that. And that's, you know, up to us to manage as well. So, yes, it's frustrating, but, you know, we're always focused on how we can, you know, maximize the conversion of our working capital into cash for sure.
spk08: Okay. Thank you. I'll pass the mic. Thank you.
spk06: We have time for one final question, which will come from Drew McReynolds with RBC Capital Markets.
spk01: Yeah, thanks very much. Good morning. John, just wanted to drill a little bit more into the TV programming side and your ability to manage the timing or volume. I'm just trying to get a good sense of what the delta is here and your ability to do that. Obviously, Doug's gone over a lot of amazing strategic initiatives. I don't think the street has any doubt that you can manage your costs where you have that ability. But what I'm unclear is just given the margin pressure that we saw on TV in Q4 and inevitably some year-over-year margin pressure coming in fiscal 2023, it's such a big delta here for leverage, which feeds through to everything else. Can you give us any greater sense of how sizable that ability on timing or volume is?
spk02: Sure. You're right, Drew. There are a lot of moving pieces in it. The thing that is the most under our control is Canadian, obviously, because we commission a lot of that directly, and we don't have to worry about simulcasts. 99% of the time, et cetera. So that's an area we can look at, but we've got the catch-ups that we have got the other eye on, right? So there's always some flow there. And frankly, Canadian typically doesn't really ever come in exactly on the timing that we expect, i.e. it can be delayed. And that's nothing to do with catch-up or COVID. On the sort of components of, you know, what's really – within our control in terms of timing. The output deals, as I said, they're set at the start and they run. So there's really not an opportunity there. On the prime time stuff we get for global, when it runs, we're going to run it because we want it in simulcast and we're going to pay for it. So the opportunity really there is that just the delivery pattern or reduced episode counts, which isn't really within our control. We know what we've put our hand up for and that's going to come. So it's just a question of when and how much. And then there's a handful of things that we buy more a la carte or more show by show. They might be on fixed price output deals, but some of those things we also can control the timing to some extent. I'd say that that's a relatively small number. It's less than 10% of the total programming cost is in that category. So, yeah, it's limited, but to the extent we can do it, we're going to do it.
spk04: Maybe I'll just add a few things. I mean, we certainly have some costs that are variable to revenue. So the CPE is one based on the downstroke in Q4 that there's some CPE immediate reductions we can roll through the system. For fiscal 23, there's a bunch of variable revenue-related cost commissions, et cetera, that will immediately pick up, you know, as well. And the other thing I would say is to the extent to which this recession persists, as does the border, you know, our suppliers on simulcast may themselves decide to match demand with supply, and so oftentimes in the past recessions, because we've gone back and looked at, a number of different recessions in the last 15 years, and there are some evident patterns. And one of them is if the U.S. – and none of us wants the U.S. to slide into a recession, let's be clear. But if the U.S. does enter into a recession, then they will also be managing their programming costs accordingly. And if we're on a simulcast end of that deal, we'll benefit.
spk01: Got it. Got it. Okay, that's incredibly helpful. Thank you for that. One last one for me on – Just the interest rate exposure maybe for you, John. I know subsequent to the quarter you did an interest rate swap, but just can you give us a sense of just higher rates here, how that just flows through?
spk02: So our rate at the end of the year all in with the two high yield notes was 5.6% weighted. Yeah, we have locked in. hedged around half of the bank debt. Of course, the notes are naturally hedged because they're fixed rates. So that's the position we take. We always like to leave ourselves a little bit of room for repayment on the term loan because it's very flexible. And we're typically not highly, highly hedged on that. So that's where we've landed in terms of our hedging strategy. To the extent, I guess, that there are some continued movement in those shorter-term rates, then we'll have some exposure on a disabled half of the term loan.
spk01: Okay, perfect. Thank you very much. Thank you.
spk06: Ladies and gentlemen, this does conclude your question and answer session. Turning the call back to Doug Murphy for closing remarks.
spk04: Thanks, Jake, and thank you, everybody. We're pleased to spend more time with you if you'd like. Feel free to reach out to John or myself from our caller on the quarter, and we hope you have a fantastic weekend. Take care now.
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